Record red meat production and a 13% jump in cattle placed in feedlots during September, record high hog numbers on Sept. 1 and whole turkey stocks up 23% from last year on Sept. 30 indicate meat supplies are ample and will remain so, keeping pressure on prices, although strong domestic and export demand may offset some of the pressure.
The U.S. Department of Agriculture in its October Livestock Slaughter report said September production of beef and pork both were up 2% from a year ago with pork and total red meat outturn record high for the month. January-September production of red meat was up 4% from the same period last year, with beef up 5% and pork up 3%.
Supplies of pork are expected to remain ample, with the U.S.D.A. estimating the total U.S. hog inventory on Sept. 1 near 74 million head, the highest for the date since records began in 1988 largely due to breeding herd expansion that began in 2011. In its October Livestock, Dairy and Poultry Outlook, the U.S.D.A. forecast record high pork production in the fourth quarter of 2017 and in all of 2018. Slaughter hog prices fell more than 40% between late July and late September, but still were slightly above a year ago. Prices are expected to decline further in 2018.
Lower hog and pork prices are expected to boost already strong export demand for pork, the U.S.D.A. said, which is expected to mitigate some of the price pressure. An indication of strong pork demand was the opening of two new packing plants in September, one in Iowa and the other in Michigan, first announced in 2014 and 2015.
Beef supplies also remain ample and show no sign of easing any time soon with the 13% jump in September placements of cattle on feed, with those cattle coming to market over the next three to five months.
“Large numbers of fed cattle and increases in carcass weights are expected to result in just over 7% more beef year over year in the fourth quarter of 2017,” the U.S.D.A. said. “This will likely pressure wholesale Choice beef prices.”
Strong domestic beef demand and stronger-than-expected export demand from major buyers such as Japan, Hong Kong, Canada and Mexico are not expected to be enough to support beef prices, especially when large amounts of competitive pork and poultry are considered. The U.S.D.A. forecast Choice steers to average $119.55 a cwt in 2017, down slightly from $120.86 a cwt in 2016 but above a range of $111 to $120 a cwt forecast for 2018.
Adding to the meat mix is ample supplies of chicken (broilers) and turkey, for which demand has not been as robust as it has been for red meat, especially for turkey. It should be noted that per capita domestic chicken consumption surpasses that of beef and pork individually, and has for years. Demand for chicken has been hurt by a 10% drop in exports to Mexico, which has boosted its domestic production, and increased imports from Brazil.
For turkey, ample supplies are weighing on prices. Although production has shown signs of slowing, supplies in freezers on Sept. 30 were up 11% from a year earlier, with frozen whole turkey stocks up 23% with Thanksgiving fast approaching. In comparison, frozen chicken stocks on Sept. 30 were up 7% from a year earlier, frozen beef stocks were down 6% and frozen pork stocks were down 4%.
“Wholesale whole turkey prices fell in 2017, relative to 2016, and have remained below historical averages since January, indicating that demand may not be keeping up with current supply levels,” the U.S.D.A. said, noting that whole turkey prices averaged 96c a lb in late September. “The last time wholesale prices were below $1 per lb as late as September was in 2010.”
That begs the question: how much will Thanksgiving turkeys cost this year? The U.S.D.A. suggests lower wholesale prices for whole turkey may translate into lower retail prices. On the other hand, retailers may choose to not decrease their average markup from wholesale as much this year, which may keep turkey prices at higher levels.
An area of concern is ongoing renegotiation of the North American Free Trade Agreement. Mexico is the largest export market for U.S. turkey (59% of total exports in 2016), broiler meat (21%) and pork (31%) and is the third largest for beef. Canada is the third largest export market for U.S. pork and fourth largest for beef. Changes to NAFTA could have a major impact on U.S. pork and poultry meat exports.